Bidco Oil Refinery Ltd.’s Performance and Ethics

Analysis of the company’s mission, vision, and performance

Bidco Oil Refinery Limited is a multinational company that specializes in edible oil production. The company has its headquarters in Thika, Kenya. It started in Kenya as a textile company in 1985. Due to the increased market liberalization in the country, the company expanded its operations to include edible oil refinery. It moved its headquarters to Thika in 1991, where it has seen its operations traverse the East Africa region (Terence, 2013). Bidco believes in its mission that revolves around serving all customers’ needs to enhance a ‘happy and healthy living.’ This is possible through branding and enhancing environmental custodianship. The company’s most important edge over its rivals is the ability to produce high-quality products while at the same time investing heavily in environmental custodianship. To achieve its mission, Bidco has a vision statement that captures the need to expand and increase its market share across Africa. Currently, its products are in 13 countries located in sub-Saharan Africa.

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Both the mission and the vision of the organization reflected in the performance of the company. Since its rapid expansion, the company has experienced unprecedented growth. Under the management of Bhimji Shah, the company experienced a 500% growth between 1993 and 1997. By 1999, the company had grown its capacity by 400% (Terence, 2013). Due to its increased expansion, the company moved to Tanzania, where its impact was felt immediately. It started by acquiring Shivji Limited that was a major manufacturer of soaps and detergents in Tanzania. By 2005, Bidco was among the top companies in Tanzania. As the company grew, it continued to acquire medium-sized companies across the East African region to consolidate its market share. It acquired some of the products previously produced by Unilever. Despite its tremendous growth in sub-Saharan Africa, the company dedicates a substantial amount of its profits to environmental custodianship, among other corporate social responsibility (CSR) strategies.

Bidco oil refinery company’s strategies relate to the mission and the vision statements. Particularly, the company has the mission to ensure environmental custodianship and guarantee that it meets all the needs of the customers. In addition to environmental custodianship, the company utilizes the strategy of motivating the internal stakeholders who include the employees. CEO, Vimal Shah articulates that the company enhances the creation of ‘Bidco environment’ (Terence, 2013). He says that a company ought to create an atmosphere where all members of staff believe in change and better ways of achieving objectives. Besides, the company has created an environment that allows ideas to grow. The company also values self-development and career growth. The strategy has had a myriad of benefits for the company, including a highly motivated team and increased productivity (Kerr, 2005). For instance, the employees of the company have always valued the importance of the environment. So they engage in a tree-planting activity every month. This way, the company is able to establish a link between strategy and its mission.

The strategy of the company also captures the vision statement. With the objective of leading the market by 2030, the company ensures that it remains competitive in the dynamic African business environment. It has embarked on acquisitions to increase its market share in sub-Saharan Africa (Terence, 2013). Notably, the company acquired Shivji Limited, Unga Limited, in addition to a notable product line of Unilever. This strategy has made the company to be among the leaders of edible oils manufacturers in East, Central, and Southern Africa. Another strategy that has driven the company towards the attainment of its objectives is the appreciation of change. The company has allowed a change in management and technology to characterize its production and distribution activities (Terence, 2013). The company has acquired improved technology to boost its production capacity and assert its presence in the African market (Miles & Snow, 2008). This has enhanced the chances of the company to achieve its vision.

Financial Performance

In the fiscal year 2012, the company recorded a 12% increase in annual sales. This is an increase in growth, considering that the company had made a profit increase of about 10% during the preceding financial year (Terence, 2013). The CEO, Vimal Shah, attributes the growth in profits to the company’s robust expansion as well as superior strategy. Despite the increase in operating costs across Africa, Bidco has remained profitable and has rolled out an ambitious plan to enter the Western African business environment. Also, the company’s profitability has come about due to the marketing strategy that the company has adopted. Across East Africa, the company produces goods that do not only meet the customers’ needs but also attract them. Product differentiation has steered the company to profitability. The rationale is that the company produces different products with different branding that hugely depends on the local market. For instance, detergent brands such as ‘Gental,’ are branded differently in various countries to attract customers. This has continuously led to an increase in the ability of the company to meet its financial goals and objectives.

The company has also continued to grow in terms of the asset base. Due to acquisitions of different firms, Bidco has increased its fixed assets that can be essential in offsetting liabilities. The assets have grown by 68% percent since 2010, which implies that the company has continued to grow (Terence, 2013). In the financial year 2008, however, the company experienced a slow growth pace owing to political factors in the business environment that hindered growth. Political instability in East Africa during the time led to an increase in production as well as distribution costs. Shah says that the effect of political instability in Africa has remained to be a major threat to the profitability of the company. In 2008, the company’s profits grew marginally by 2.5%. Over and above, the company’s mission of meeting the customers’ needs has shaped the organizational goal and steered Bidco towards the achievement of its goals (Terence, 2013). Besides, the company estimates its growth to surpass 15% in the second quarter of the current financial year.

Competitive and Marketing Analysis of Bidco

Bidco oil refinery Limited has withstood competition from other vegetable oil manufacturers, including Unilever and Kapa oil refinery limited. To that end, it is important to conduct a SWOT (strengths, weaknesses, opportunities, and threats) to reveal Bidco’s competitive advantages and its marketing strategy. At the outset, Bidco’s strengths emanate from the perception of the consumers that the company operates within the local industry. This has helped it to consolidate its market share in sub-Saharan Africa and ensure that the customers’ needs are reflected in the products.

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Additionally, the company has a superior strategy than its competitors in the sense that it has been able to retain talent and manage the expertise of employees. This way, the company has a positive public image that increases brand recognition and awareness.

Moreover, Bidco has been at the forefront in advocating for environment conservation and introduced an education trust fund that assists able and needy children within the community. All these factors heighten the company’s brand image and can facilitate the company to achieve its objectives (Levine& Tyson, 1990). Finally, the company has stable financial performance and profits that can allow the implementation of robust marketing strategies in all realms of its operations.

Nonetheless, the company has several weaknesses that could deter it from achieving its financial obligations. Lack of clear policies of acquisition has led to the inability of the company to identify feasible companies for acquisition. For instance, the acquisition of Unga limited in Kenya did not lead to a significant increase in market share due to the prior performance by the company. Another weakness is the company’s organizational structure that does not have precise policies that guide all operations, especially in franchises that it has established outside Kenya. Despite the apparent weaknesses, the company has a myriad of opportunities to exploit to attain its objectives that are clear in the mission and vision (Terence, 2013). They include the ability to venture into emerging markets, especially in West Africa. Business analysts say that Bidco’s financial position is enough to propel the company to be a market leader even before the year 2030. Besides, the company has the opportunity to differentiate its products to attract more customers (Kerr, 2005). This will depend hugely on the needs of the customers, particularly in the new markets. Finally, the company has the opportunity to increase its production capacity to meet the growing demand for its goods.

Although there are innumerable opportunities that Bidco can exploit to remain profitable amid financial challenges, there are equally many threats that it should comprehend. First, competition is increasing across Africa with the increase of huge multinationals that have stronger financial bases than Bidco (Belda, 2006). For instance, Unilever has a larger market share of vegetable oil and detergents in the sub-Saharan market than Bidco. Second, the political environment of the region remains unpredictable, leading to heightened political risk. In 2008, the company experienced marginal growth after political uncertainty disrupted its operations in Kenya. The rise of multinationals from China is a major threat to the company. The reason is that Chinese products are relatively cheap due to lower production costs in China than in East Africa. To this end, the company has had to reduce the prices of particular products to match the prices of the competitors (Levine& Tyson, 1990).

Importance of Niche Marketing in Bidco

Bidco should adopt a niche marketing strategy. It refers to a strategy where the company focuses on a subset of the market, such as young people. The company produces specific products for the identified niche with a specific price range. In a niche marketing strategy, Bidco should be able to assure its niche market of satisfactory products, prices as well as quality (Miles & Snow, 2008). To that end, the company should target the urban residents in the countries of its operations. The urban populace will serve as a small market segment that the company wishes to satisfy. Due to the price elasticity of demand that the company will experience, its products will constitute the mainstream niche (Schein, 2004). The mainstream niche due to a wide category of the market will, in turn, result in lower prices giving Bidco a competitive edge over its competitors. Although niche-marketing prices do not necessarily reflect the quality of the products that the company produces, the prices are closely linked to the particular needs that the company seeks to satisfy. In some instances, Bidco could use a niche-marketing strategy to increase its brand recognition and awareness across Africa. Due to the increase in connectedness and improvement in technology across East Africa, the company could also embark on online niche marketing with the aim of increasing predictability and the market (Schein, 2004).

By using niche marketing, Schein (2004) says that the company is likely to increase the value of the shareholders by increasing its profit margin. The rationale is that the company will be in a position to retain its customers by the production of goods that satisfy their current specific needs. Second, Lotz (2007) articulates that the company stands to benefit from increased brand recognition that brings about prestige and improved brand image. This will not only increase the company’s competitiveness in the short-term but also ensure that the company has loyal customers to propel its performance in the long-term. Instead of the fact that the urban populace in sub-Saharan Africa has continued to grow and enjoy connectivity, the company can reduce its marketing costs in the long run. The reason is that the company will utilize such strategies as online niche marketing to minimize marketing expenses. To that end, Bidco’s strategy of niche marketing will provide a platform for competitiveness and growth.

Potential Acquisition for Bidco

Bidco should consider an acquisition or a merger with other companies operating in the region. The rationale is that acquisitions increase a company’s profitability due to the increased market share. For instance, if company A that controls 23% of the market share in a given market acquires a company B that has 12% in market share, the combination of the two companies may consolidate a market share of about 37% (Terence, 2013). As such, Bidco should identify potential firms that it can acquire as it seeks to increase its market share. Acquisitions will also lead to increased stability since the company will increase its asset base. A high number of assets that a company owns increases its ability to incur debt in hostile markets and offset the liabilities accruing the company (Lotz, 2007). In the East Africa region, vegetable and edible oil refiners are few.

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Bidco should, therefore, consider an acquisition of such companies as Kapa oil refineries and Menengai companies that have a huge number of customers within the region. With such an acquisition, the company will virtually control over 75% of the market share in the region. The company should also exploit the opportunity presented by multinationals in forming a merger. For instance, the company could merge with Unilever to differentiate some of its products. This is in recognition of the fact that the company experienced unprecedented growth when it acquired Elianto product from Unga group limited. This way, Miles & Snow (2008) assert that the company will ensure that it remains competitive as it seeks to make an entry into Western Africa’s market. Acquisition of Kapa oil refineries and Menengai Company will not only lead to the consolidation of sub-Saharan Africa but also increase the company’s profit margin. This way, the company will be able to meet its most important objective, which is to increase the worth and value of the shareholders.

Employees’ Motivation at Bidco

Considering the company’s performance in the recent past, the company should do more to increase the motivation of the employees. According to Lotz (2007), the company has always been at the forefront in agitating for increased benefits for employees. This has increased the employees’ satisfaction leading to marginal improvement in productivity. Nonetheless, this could increase tremendously if the company could embrace the idea of pay for performance model of compensation. Pay for performance should target the employees located in countries where the company has opened franchises and branches (Milkovich & Wigdor, 1991). The current strategy in compensation has had a myriad of challenges, including the inability of the employer to quantify the amount of time that the employees work in overtime. According to Kerr (2005), pay for performance has become a major model in compensation of the employees leading to increased motivation and job satisfaction.

Belda (2006) points out that there are various advantages associated with pay for performance. First, the model appreciates and recognizes the importance of motivating employees who extra hard to ensure that the company achieves its objectives. Those employees who work extra hard should also see their effort culminate in rewards. To that end, employees get the motivation to ensure that the company remains one of the marketing leaders in the African continent (Kerr, 2005). The managers of the company ought to be sensitive about the compensation of the employees due to the underlying factor that it cannot become a competitive organization without satisfying its employees (Miles & Snow, 2008). Although the strategies have succeeded in major multinational companies across the world, it is important to notice that it might have a demoralizing effect, especially for employees whose efforts are yet to elicit the recognition of the employer. This may lead to a demoralized segment of the company. Nonetheless, pay for performance has worked in many African companies, and it will be a good start for Bidco.

Strategy and Ethical Behavior

Bidco’s strategy has considered various ethical issues that all companies ought to abide by in their operations. Particularly, the company has ensured that all stakeholders of the company befit from its operations. Importantly, the company’s stakeholders include society and communities. For this reason, the company has ensured that its newly established education trust fund helps the community. Miles & Snow (2008) say that the program allows the company to help needy students to access education, which has become elusive in the African context. Besides, Bidco has ensured that its environmental policy allows it to engage in activities that do not lead to environmental degradation (Kerr, 2005). The company dedicates over 20% of its revenues to environmental conservation. To achieve these ethical standards, the company has continued to comply with ethical guidelines provided in all regions that the company operates (Milkovich & Wigdor, 1991). This is in addition to ensuring that Bidco has eco-friendly branding and production.

References

Belda, P. (2006). Kenya: Management of Oil Refineries Companies. Nairobi: Longhorn Publishers.

Kerr, J. (2005). Diversification strategies and managerial rewards. Academy of Management Journal, 28(6), 155-179.

Levine, I. & Tyson, D. (1990). Participation, productivity, and the firm’s environment. Washington, D.C.: Brookings Institution.

Lotz, D. (2007). The Television Will Be Revolutionized. New York: New York University Press.

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Miles, R, & Snow, C. (2008). Organizational strategy, structure, and process. New York: McGraw-Hill.

Milkovich, G. & Wigdor, A. (1991). Pay for performance. Washington, D.C.: National Academy Press.

Schein, E. (2004). Organizational Culture and Leadership. Upper Saddle River, New Jersey: Prentice hall Publishers.

Terence, J. (2013). Management and Change in Africa: A Cross Cultural Perspective. New York: McGraw Hill Publishers.

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StudyCorgi. (2021, January 25). Bidco Oil Refinery Ltd.'s Performance and Ethics. Retrieved from https://studycorgi.com/bidco-oil-refinery-ltd-s-performance-and-ethics/

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